Opinion
19-CV-2926 (VSB)
03-18-2024
PREFERRED FREEZER SERVICES, LLC, Plaintiff, v. AMERICOLD REALTY TRUST, Defendant.
Appearances: Blair R. Albom Eric J. Seiler Mala A. Harker Friedman Kaplan Seiler & Adelman LLP Robert S. Smith Law Offices of Robert S. Smith Counsel for Plaintiff Charles B. Straut II Quinn Emanuel Urquhart & Sullivan, LLP Michael B. Carlinsky Jonathan Pickhardt Rex Lee Monica E. Tarazi Quinn Emanuel Urquhart & Sullivan, LLP Mark C. Zauderer Grant A. Shehigian Dorf Nelson & Zauderer LLP Counsel for Defendant
Appearances:
Blair R. Albom
Eric J. Seiler
Mala A. Harker
Friedman Kaplan Seiler & Adelman LLP
Robert S. Smith
Law Offices of Robert S. Smith
Counsel for Plaintiff
Charles B. Straut II
Quinn Emanuel Urquhart & Sullivan, LLP
Michael B. Carlinsky
Jonathan Pickhardt
Rex Lee
Monica E. Tarazi
Quinn Emanuel Urquhart & Sullivan, LLP
Mark C. Zauderer
Grant A. Shehigian
Dorf Nelson & Zauderer LLP
Counsel for Defendant
OPINION & ORDER
VERNON S. BRODERICK, UNITED STATES DISTRICT JUDGE:
Before me is Defendant Americold Realty Trust's (“Americold”) motion to dismiss Plaintiff Preferred Freezer Services, LLC's (“PFS”) amended complaint pursuant to Rules 12(b)(6) and 12(b)(1) of the Federal Rules of Civil Procedure (“Amended Complaint”). (Doc. 64.) Because Plaintiff fails to plausibly allege that the information at issue constitutes a “trade secret” under the Defend Trade Secrets Act of 2016 (“DTSA”), 18 U.S.C. § 1836, et seq., Defendant's motion to dismiss PFS's Defend Trade Secret Act claim is GRANTED. In the absence of a viable federal claim, I decline to exercise supplemental jurisdiction over the remaining state-law claims.
The facts set forth herein are taken from the allegations contained in Plaintiff's sealed Amended Complaint. (Doc. 62.) I also consider declarations and certain exhibits attached thereto. See Cohen v. Rosicki, Rosicki & Assocs., P.C., 897 F.3d 75, 80 (2d Cir. 2018) (“A complaint is . . . deemed to include any written instrument attached to it as an exhibit, materials incorporated in it by reference, and documents that, although not incorporated by reference, are integral to the complaint.” (internal quotation marks omitted)). I assume these factual allegations to be true for purposes of this motion. See Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). My references to these allegations should not be construed as a finding as to their veracity, and I make no such findings.
A. Relevant Facts Prior to Bidding Process
Plaintiff PFS is a limited liability company involved in the refrigerated warehouse business. (Am Compl. ¶¶ 1, 20.) Defendant Americold is a real estate investment trust in the cold-storage warehouse business and a competitor of PFS. (Id. ¶¶ 1, 17.) PFS leased the real estate on which it maintained its business operations. (Id. ¶ 21.) PFS refers to this as an “asset-lite” business model. (Id.) In this model, the real estate developer remains the property owner after construction. (Id.) In contrast, Americold both owns and operates its warehouses. (Id. ¶ 25.) PFS has since been acquired by Lineage Logistics LLC (“Lineage”). (Id.)
“Am. Compl.” refers to PFS's sealed Amended Complaint filed on June 26, 2020. (Doc. 62.)
In December 2017, Lincoln Property Company, a commercial real estate broker, contacted Americold regarding the potential purchase of a PFS facility in Sharon, Massachusetts (the “Sharon Facility”). (Id. ¶ 27.) Shortly thereafter, Americold entered into a confidentiality non-disclosure agreement with the property's owner, Jumbo Capital Management LLC. (Id. ¶ 28.) After executing the agreement, Americold received information about the Sharon Facility, including PFS's lease, building features, financing, prior sales history, and capitalization rates.(Id. ¶ 28.) Based on this information, Americold submitted an offer to purchase the Sharon Facility in March 2018, which Jumbo Capital Management LLC rejected. (Id. ¶ 29.)
Capitalization rate refers to the yearly rent divided by the amount paid for the property. (Am. Compl. ¶ 28.)
Several months later, Americold entered into a similar agreement with a real estate broker regarding another PFS facility in Perth Amboy, New Jersey (the “Perth Amboy Facility”). (Id. ¶ 30.) Like with the Sharon Facility, Americold received access to information about the property, including its age and square footage, the tenant, and the type of existing lease and its duration. (Id.) However, Americold did not bid on the Perth Amboy Facility. (Id.)
B. The Bidding Process
In September 2018, PFS engaged UBS Securities LLC (“UBS”) to explore a possible sale of its business. (Id. ¶ 31.) To facilitate a sale, UBS contacted over one hundred potential buyers. (Id. ¶ 32.) Of the one hundred potential buyers, sixty entered into NDAs with PFS. (Id.) After executing an NDA and signing a Confidentiality Agreement, the potential buyers gained access to a virtual data room. (Id. ¶ 33.) The data room contained a memorandum concerning PFS's gross rent, average revenue per facility, financial metrics, property locations, lease details, and facility-development process. (Id. ¶¶ 33, 60-62.) The memorandum also disclosed that PFS was considering bringing ownership “back in house” by purchasing its leased properties itself. (Id. ¶ 46.) Bidders were also granted access to financial models, EBITDA adjustments, lease summaries, industry reports, and various projections and business plans. (Id. ¶ 34.) After several bidding rounds, Lineage signed an agreement and plan of merger with PFS. (Id. ¶ 38.)
C. Americold's Involvement in the Bidding Process
Early on in the bidding process, Americold contacted UBS to inquire about purchasing PFS, and represented in discussions with UBS that it was interested in acquiring PFS. (Id. ¶¶ 39, 43.) Prior to these discussions, Americold's Executive Vice President and Chief Investment Officer (“CIO”), James A. Jay Harron, created a spreadsheet called the “M&A Hit List” (“Hit List”), outlining potential companies to acquire. (Id. ¶ 40.) PFS properties were included on the Hit List. (Id.) Harron and Scott Pertel, a representative of HFF, Inc. (“HFF”), a commercial real estate broker, discussed Americold's potential purchase of PFS on October 16, 2018. (Id. ¶ 44.)
On October 23, 2018, Americold entered the bidding process with PFS, and signed PFS's Confidentiality Agreement to gain access to the data room. (Id. ¶ 48.) On October 29, 2018, Pertel emailed Harron a spreadsheet summarizing all the information HFF had gathered using its own resources concerning PFS's properties. (Id. ¶ 56.) Pertel then contacted PFS's landlords to learn more about the properties. (Id. ¶ 58.)
On November 1, 2018, representatives from Americold met with representatives from PFS. (Id. ¶ 73.) The Americold representatives asked additional questions about PFS, its business model, and its properties. (Id. ¶¶ 73-78.) Americold also contacted at least one of PFS's major landlords to learn additional information about the properties. (Id. ¶ 80.) Americold eventually submitted a bid for the purchase of PFS, but its bid was rejected. (Id. ¶ 82.)
At or around the same time that Americold submitted its unsuccessful bid to purchase PFS, Americold entered into an engagement with HFF. (Id. ¶ 83.) Americold and HFF continued to communicate with the PFS landlords about PFS's properties. (Id.) On January 3, 2019, PFS learned that Americold made an offer to purchase the Sharon Facility from the owners, Jumbo Capital LLC. (Id. ¶ 86.) Jumbo Capital told PFS's Chief Financial Officer (“CFO”) that Americold had indicated in its discussions concerning purchasing the Sharon Facility that it was familiar with PFS's lease structure. (Id. ¶ 85.) Harron, the CIO of Americold, had a subsequent phone call with PFS's CFO in which Harron indicated that Americold's participation in the PFS bidding process rekindled its interest in the Sharon Facility. (Id. ¶ 88.) PFS also learned from its other landlords that Americold was evaluating and actively bidding to purchase seven of its properties. (Id. ¶ 91.) Americold then offered to purchase two additional PFS locations in Chicago, Illinois and Westfield, Massachusetts. (Id. ¶ 92.) Americold successfully entered into purchase agreements with PFS's landlords for seven PFS properties. (Id. ¶ 94.)
Based on this series of events, PFS alleges that Americold misappropriated trade secrets to bid on PFS properties, which inflated the market prices and weakened PFS's negotiating position in future dealings with its landlords. (Id. ¶ 99.)
II. Procedural History
Plaintiff PFS filed the initial sealed complaint (“Initial Complaint”) against Defendant Americold on April 2, 2019. (Doc. 4.) That same day, Plaintiff filed an unsealed redacted version of the Initial Complaint. (Doc. 2.) On February 18, 2020, I granted in part and denied in part Defendant's Motion to Stay and for Costs Pursuant to Federal Rule of Civil Procedure 41(d). (Doc. 34.) I found that Plaintiff's earlier-filed state action (“State Action”) and this action (“Federal Action”) were similar enough to conclude the Federal Action was based on or includes the same claims against the same defendant as the State Action, and granted Defendant's motion for an award of costs. (Id. at 7-10.) I denied Defendant's motion for a stay of the Federal Action because Plaintiff assured me that it would promptly comply with the order for costs. (Id. at 11.) On June 22, 2020, the parties filed a stipulation that Plaintiff shall owe Defendant an award of $550,000 plus interest at a rate of two percent per annum. (Doc. 58.)
Defendant based that motion on the fact that Plaintiff PFS filed an action on February 11, 2019 in the Supreme Court of New York with the same state claims asserted in this action, seeking damages, a temporary restraining order, and a preliminary injunction. (Doc. 34, at 2-3.) Justice O. Peter Sherwood of the Supreme Court of New York denied Plaintiff's motion. (Id. at 3.) Plaintiff appealed to the New York Supreme Court Appellate Division, First Department. (Id.) The Appellate Division panel denied Plaintiff's application. (Id.) Plaintiff filed a notice of discontinuance of the State Action on the same day it filed the Initial Complaint in this action. (Id. at 3-4.)
On April 10, 2020, Defendant filed its motion to dismiss the Initial Complaint, a sealed memorandum of law in support of the motion, and the sealed supporting Declaration of Jonathan E. Pickhardt. (Docs. 41, 45-46.) Defendant filed unsealed redacted versions of the Memorandum of Law and Declaration. (Docs. 42-43.) On June 9, 2020, I granted Plaintiff's motion for an extension of time to file the Amended Complaint and denied Defendant's Motion to Dismiss as moot without prejudice. (Doc. 56.)
On June 26, 2020, Plaintiff filed its sealed Amended Complaint. (Doc. 62.) The Amended Complaint contains one federal claim and six state-law claims: (1) violation of the Defend Trade Secrets Act (18 U.S.C. § 1836); (2) fraud in the inducement; (3) breach of contract; (4) breach of the covenant of good faith and fair dealing; (5) tortious interference with prospective economic advantage; (6) unfair competition; and (7) misappropriation of confidential information. (Doc. 62.) On July 10, 2020, Defendant filed the motion to dismiss the Amended Complaint (“Motion to Dismiss”), a sealed memorandum of law in support, and a sealed declaration of Jonathan E. Pickhardt. (Docs. 64, 68-69.) Defendant filed redacted versions of these documents on the public docket as well. (Docs. 65-66.) On July 24, 2020, Plaintiff filed a sealed memorandum of law in opposition to the Motion to Dismiss. (Doc. 76.) On August 7, 2020, Defendant filed a redacted reply memorandum of law in support of its Motion to Dismiss the Amended Complaint, (Doc. 80), as well as an unreacted copy under seal, (Doc. 83).
III. Legal Standard
To survive a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim will have “facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id. This standard demands “more than a sheer possibility that a defendant has acted unlawfully.” Id. “Plausibility . . . depends on a host of considerations: the full factual picture presented by the complaint, the particular cause of action and its elements, and the existence of alternative explanations so obvious that they render plaintiff's inferences unreasonable.” L-7 Designs, Inc. v. Old Navy, LLC, 647 F.3d 419, 430 (2d Cir. 2011).
In considering a motion to dismiss, a court must accept as true all well-pleaded facts alleged in the complaint and must draw all reasonable inferences in the plaintiff's favor. Kassner v. 2nd Ave. Delicatessen Inc., 496 F.3d 229, 237 (2d Cir. 2007). A complaint need not make “detailed factual allegations,” but it must contain more than mere “labels and conclusions” or “a formulaic recitation of the elements of a cause of action.” Iqbal, 556 U.S. at 678 (internal quotation marks omitted). Finally, although all allegations contained in the complaint are assumed to be true, this tenet is “inapplicable to legal conclusions.” Id. A complaint is “deemed to include any written instrument attached to it as an exhibit or any statements or documents incorporated in it by reference.” Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002) (quoting Int'l Audiotext Network, Inc. v. Am. Tel. & Tel. Co., 62 F.3d 69, 72 (2d Cir. 1995)). “Even where a document is not incorporated by reference, the court may nevertheless consider it where the complaint ‘relies heavily upon its terms and effect,' which renders the document ‘integral' to the complaint.” Id. at 153 (quoting Int'l Audiotext, 62 F.3d at 72).
IV. Discussion
A. Plaintiff's DTSA Claim
1. Classification as Trade Secrets
a. Applicable Law
To plead misappropriation of a trade secret under the DTSA, a plaintiff must show “an unconsented disclosure or use of a trade secret by one who (i) used improper means to acquire the secret, or, (ii) at the time of disclosure, knew or had reason to know that the trade secret was acquired through improper means, under circumstances giving rise to a duty to maintain the secrecy of the trade secret, or derived from or through a person who owed such a duty.” In re Document Techs. Litig., 275 F.Supp.3d 454, 462 (S.D.N.Y. 2017) (quoting 18 U.S.C. § 1839(3) (A)-(B)). Similarly, under New York law, “a party must demonstrate: (1) that it possessed a trade secret, and (2) that the defendants used that trade secret in breach of an agreement, confidential relationship or duty, or as a result of discovery by improper means.” Id. at 461-62 (citing N. Atl. Instruments, Inc. v. Haber, 188 F.3d 38, 43-44 (2d Cir. 1999)).
PFS's Confidentiality Agreement's characterization of “Confidential Information” is notably broader than the definition of “trade secrets” under the DTSA:
non-public, confidential or proprietary information about the Company including, without limitation, information in any form or medium regarding the Company's current and prospective business, plans, forecasts, assets, liabilities, conditions, affairs, results, finances, strategies, products, services, technology, software, trade secrets, business processes, know-how, data, employees, agents, customers, licensors and vendors (all such furnished information provided to you on or after October 15 2018 in connection with the Transaction....”)(Am. Compl. ¶ 49 (quoting the Confidentiality Agreement § 1).) Accordingly, in determining whether the information at issue constitutes a trade secret, I am guided by the DTSA's definition and related case law, rather than the language in the Confidentiality Agreement. See Oakwood Lab'ys LLC v. Thanoo, 999 F.3d 892, 904 n.10 (3d Cir. 2021) (collecting cases explaining the difference between a breach-of-contract claim, which turns on the contractual language, and a trade-secrets claim, which turns on the statutory text).
A “trade secret” includes “all forms and types” of information that “derives independent economic value . . . from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information,” and that the owner of which took “reasonable measures” to keep secret. 18 U.S.C. § 1839(3). New York courts generally adopt the six-factor test articulated in the First Restatement of Torts to determine whether information constitutes a trade secret under either the DTSA or state law, assessing
(1) the extent to which the information is known outside of the business; (2) the extent to which it is known by employees and others involved in the business; (3) the extent of measures taken by the business to guard the secrecy of the information; (4) the value of the information to the business and its competitors; (5) the amount of effort or money expended by the business in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others.Ashland Management Inc. v. Janien, 82 N.Y.2d 395, 407 (1993) (quoting Restatement of Torts § 757 cmt. B (internal quotation marks omitted)).
b. Application
Since the DTSA applies only to trade secrets, and Defendant challenges whether the information at issue in fact constitutes trade secrets, I begin my analysis with whether the Amended Complaint alleges trade secrets under the DTSA. The confidential information alleged in the Amended Complaint includes “detailed lease summaries of PFS' locations, lease guarantee information, PFS' facilities infrastructure models, PFS' financial plans, financial models, business strategy, actual and prospective financial performance including revenue by facility, capacity utilization, revenue growth, revenue by employee, growth possibilities, and credit quality as a tenant.” (Am. Compl. ¶ 4.) Plaintiff alleges that Americold misappropriated the confidential information when it bid on PFS's properties, and that these actions drove up the market price and weakened PFS's negotiating position. (Id. ¶ 99.) Because I find that the information PFS claims is a trade secret is generally known to, or easily ascertainable by, individuals outside of PFS, I find that it does not constitute a trade secret and that PFS therefore fails to state a violation of the DTSA.
i. General Knowledge of the Information Outside of PFS
A trade secret “is not simply information as to single or ephemeral events in the conduct of the business; rather, it is a process or device for continuous use in the operation of the business.” Sit-Up Ltd. v. IAC/InterActiveCorp., No. 05-CV-9292, 2008 WL 463884, at *8 (S.D.N.Y. Feb. 20, 2008) (quoting Softel, Inc. v. Dragon Med. & Sci. Commc'ns, Inc., 118 F.3d 955, 968 (2d Cir. 1997)). When analyzing whether information is a trade secret, the “most important consideration is whether the information was secret.” LinkCo, Inc. v. Fujitsu Ltd., 230 F.Supp.2d 492, 498 (S.D.N.Y. 2002) (quoting Lehman v. Dow Jones, & Co., 783 F.2d 285, 298 (2d Cir. 1986)) (alterations omitted). To constitute a trade secret, information must be that which is “not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” 18 U.S.C. § 1839(3)(B).
a. Information Regarding the Properties
Defendant argues that the alleged trade secrets concerning the properties, such as rents, capitalization rates, location and size of facilities, parent guarantees, and restrictive covenants in leases, was known and, at the very least, readily ascertainable by PFS's landlords and therefore cannot be trade secrets. (Def.'s Mot., at 13.) Plaintiff does not meaningfully contest Defendant's argument in its opposition motion, but states that the confidential information it pleaded in the Amended Complaint is “exactly the kind of information considered to be trade secrets protected by the DTSA.” (Pl.'s Opp., at 12.)
“Def.'s Mot.” refers to Defendant's Memorandum of Law in support of its Motion to Dismiss the Amended Complaint. (Doc. 68.)
“Pl.'s Opp.” refers to Plaintiff's Memorandum of Law in support of its opposition to Defendant's Motion to Dismiss the Amended Complaint. (Doc. 76.)
First, as Defendant notes, identifiable individuals outside of PFS-namely, PFS's landlords-had general knowledge of the confidential information. (Def.'s Mot., at 13.) Indeed, much of the information can be said to have belonged to the landlords, as the information concerned their properties. This information includes restrictive covenants, summaries of the leases, details of the “asset-lite” business model, facility specifications, and financing and strategic plans. (Am. Compl. ¶¶ 7-8, 23-24, 45-46, 61, 68, 76-77.) The fact that numerous third parties had access to this alleged secret information defeats Plaintiff's trade secret claim. See Big Vision Priv. Ltd. v. E.I. DuPont De Nemours & Co., 1 F.Supp.3d 224, 267 (S.D.N.Y. 2014) (alleged trade secret was not secret because it was disclosed to over sixteen third parties), aff'd sub nom. Big Vision Priv. Ltd. v. E.I. du Pont de Nemours & Co., 610 Fed.Appx. 69 (2d Cir. 2015). Plaintiff does not offer any evidence to contradict this assertion, and points only to the fact that potential bidders were required to sign the Confidentiality Agreement. (Pl.'s Opp., at 13-14.) That does not save Plaintiff's allegations because, as discussed infra, the landlords had access to this information and were under no obligation to maintain confidentiality.
Plaintiff contends that PFS's landlords only had access to information on its specific leases, and did not have unrestricted access to PFS's “financial performance, metrics and projections, business strategies, and other financial information, including its revenues and profit margins.” (Pl.'s Opp., at 15-16) (citing Am. Compl. ¶¶ 67-68.) As discussed in more detail infra, even if the landlords did not have this information and it was not known and could not be ascertained by those outside of PFS, which Plaintiff does not sufficiently plead, the information the landlords possessed on the properties constituted what Plaintiff alleges contributed to the harm-that Americold used information on the properties in negotiations with PFS's landlords to buy the properties and inflated the market value. (See Am. Compl. ¶ 99.)
Second, in addition to the landlords' knowledge of the confidential information, the information was readily ascertainable from the landlords. (See Am. Compl. ¶¶ 41, 45, 54-55, 58.) This again defeats Plaintiff's claim that the information is a trade secret. See Big Vision Priv. Ltd., 1 F.Supp.3d at 267-69 (concluding that disclosure of trade secrets to third parties destroys secrecy unless the third party is confined by an absolute obligation to refrain from further disclosure); see also Medicrea USA, Inc. v. K2M Spine, Inc., No. 17-CV-8677 (AT), 2018 WL 3407702, at *12 (S.D.N.Y. Feb. 7, 2018) (requirement that employees sign confidentiality agreements does not save the fact that third-party business partners do not sign such agreements and are under no obligation to maintain confidentiality). PFS does not allege in the Amended Complaint, nor dispute in its opposition motion, that the landlords signed any type of agreement or were under any type of obligation to keep the information on the properties confidential. Absent such an agreement, there was no mechanism to deter those external to PFS from ascertaining the information on its leases from the landlords. In fact, Plaintiff's allegations in the Amended Complaint demonstrate this possibility coming to fruition, and Plaintiff concedes this in its opposition to the motion. (See Pl.'s Opp., at 15-16.) Specifically, Americold was able to learn information regarding the properties from the landlords because they were not under any type of nondisclosure order. (Am. Compl. ¶¶ 41, 45, 54-55, 58.)
Furthermore, other mechanisms existed for outside parties to ascertain the confidential information regarding the properties, even if not from the landlords. Americold's broker, HFF, was able to amass a significant amount of this information using its own resources. (Id. ¶¶ 44, 56.) The amassed information contained many of the property details that Plaintiff maintains are trade secrets, including capitalization rates, locations and sizes of the facilities, rent prices, and lease terms. (Pickhardt Decl. Ex. A.) Generally, information that could be easily ascertained through research and follow-up efforts cannot constitute a trade secret because this information is not “secret.” See Kadant, Inc. v. Seeley Mach., Inc., 244 F.Supp.2d 19, 35 (N.D.N.Y. 2003) (“Of primary overall importance is whether the information was secret.”); see also LinkCo, Inc., 230 F.Supp.2d at 498-99 (“[T]he primary consideration in determining secrecy is whether the information is easily ascertainable by the public.”). Based on this available information, Plaintiff cannot then meaningfully claim that PFS's “facilities, such as facility design, development, locations (and their highly attractive proximity to customers, consumers, and major cities and ports)” are trade secrets. (Am. Compl. ¶ 60.)
“Pickhardt Decl.” refers to the Declaration of Jonathan E. Pickhardt in support of Defendant's Motion to Dismiss the Amended Complaint. (Doc. 69.)
Even the information that was not inherently obvious and required some form of calculation is known or readily ascertainable. As for capitalization rates, not only were these rates known by the landlords, who, as discussed supra, were under no obligation to maintain secrecy and could and did disclose them, but they could have been ascertained from analyzing the market. Capitalization rates are simply “the yearly rent divided by the amount paid for the Property.” (Id. ¶ 28 n.1.) Since the rent and the amount paid were known at the very least by the landlords, the capitalization rates could easily be calculated using those numbers. Plaintiff's claims regarding other calculations, such as EBITDA, also fail. See Murray Energy Holdings Co. v. Mergermarket USA, Inc, No. 15-CV-2844, 2016 WL 3365422, at *4 (S.D. Ohio June 17, 2016) (holding that, under Ohio state law's factors to determine trade secrets, which mirror New York's, EBITDA is not, on its own, a trade secret, without specifically pleading the confidential or proprietary nature of the figure or the underlying calculations). Additionally, Defendant alleges that these figures were readily ascertainable by reverse engineering, and Plaintiff does not argue to the contrary. This also defeats Plaintiff's argument. See Free Country Ltd v. Drennen, 235 F.Supp.3d 559, 567 (S.D.N.Y. 2016) (information that could be “easily reverse engineered,” without evidence to the contrary, indicates readily ascertainable information); see also Kadant, Inc. v. Seeley Mach., Inc., 244 F.Supp.2d 19, 37-38 (N.D.N.Y. 2003) (“Trade secret law does not offer protection against discovery by so-called reverse engineering.” (quoting Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 476 (1974) (alterations omitted)).
For the foregoing reasons, I find the information about the properties does not constitute trade secrets because it was known by the landlords and others external to PFS, or was readily ascertainable from information the landlords knew, from market analysis, public sources, or other readily available methods of calculation.
b. Information Regarding PFS's Business Model
PFS alleges that Americold misappropriated proprietary information regarding its business model, including its “six-step proprietary facility development process and its partnerships with landlords/developers to build and lease its unique, custom-designed facilities,” its “strategic plans with respect to its existing and potential future facilities,” and its “strategic real estate options,” “information demonstrating its market leadership in the industry and its many advantages over its competitors,” “its financial performance, metrics and projections,” and trade secret information relating to “its facilities, . . . logistics, operations, overall volume, business strategies, and its highly satisfied customer base.” (Am. Compl. ¶¶ 60-63.) Plaintiff emphasizes throughout the Amended Complaint that its “six-step proprietary facility development process” and the potential strategy that PFS would purchase its properties constitute trade secrets. These models relate to the way PFS generally ran its business and earned a profit. PFS refers to its model as an “asset-lite” business model in which PFS did not own any of its properties but rather leased them from its landlords. (Id. ¶ 21.) In this model, the developer remained the owner of the property. (Id.)
This process consisted of the following six steps: (1) “PFS identified target locations and researched the viability of those locations. This research included commissioning market studies and analyzing the potential customer base, pricing metrics, and existing industry competition”; (2) “PFS leased an existing temperature-controlled warehouse on a short-term basis in order to further assess the market potential”; (3) “PFS worked with an architect to design the new facility based on its unique and proprietary specifications and arranged for a third-party property developer (who eventually would become PFS' landlord/supplier) to finance and construct the facility according to those specifications”; (4) “PFS directed the developer to acquire the real estate and obtain any necessary building permits;” (5) “The developer constructed the new facility according to PFS' unique specifications, and PFS entered into a twenty-five year lease with the developer, who then became PFS' landlord. The lease was typically a ‘triple net lease,' meaning PFS was responsible for real estate taxes, insurance, other operating costs, and all of the maintenance for the facility, and the lease typically had four optional five-year extensions”; (6) “PFS opened and operated the leased facility and quickly integrated the new facility into its existing business structure and facilities.” (Am. Compl. ¶ 13.)
Pricing information, models, and related methodology do not automatically constitute trade secrets. See Free Country Ltd, 235 F.Supp.3d at 567; Marietta Corp. v. Fairhurst, 301754 N.Y.S.2d 62, 67 (2003) (holding that pricing information does not generally constitute trade secrets). To constitute a trade secret, a company must use “some type of proprietary formula that gives it a unique advantage, such as a complex pricing or trading algorithm.” Id. Information relating to “underlying mechanics, such as the prices of materials and costs of manufacturing, are not trade secrets because ‘any seller's publicly-available prices signal to competitors some information about the underlying mechanics of the seller's pricing structure.'” Id. (quoting Silipos, Inc. v. Bickel, No. 06-CV-02205, 2006 WL 2265055, at *4-5 (S.D.N.Y. Aug. 8, 2006)).
Here, PFS does not sufficiently plead that any of this information is calculated using a proprietary method or underlying proprietary information. Instead, PFS compares its six-step facility development methodology and “asset-lite” business model to that in Capstone Logistics Holdings, Inc. v. Navarrete. (Pl.'s Opp., at 12.) In that case, the court held that a proprietary customer pricing methodology that also happened to utilize a non-asset-based model constituted a trade secret. No. 17-CV-4819, 2020 WL 3429775, at *3 (S.D.N.Y. June 23, 2020), aff'd in part and remanded, 838 Fed.Appx. 588 (2d Cir. 2020). The proprietary nature of the methodology in Capstone was that it was entirely based on pricing and other development “data that is proprietary,” including “[r]ebate percentages going back to the vendor,” “backhaul and logistics pricing,” and “the forms and templates and the documents Capstone uses to assess an opportunity.” Capstone Logistics Holdings, Inc. v. Navarrete, No. 17-CV-4819, 2018 WL 6786338, at *3 (S.D.N.Y. Oct. 25, 2018), aff'd and remanded in part, 796 Fed.Appx. 55 (2d Cir. 2020) (articulating the findings of fact and conclusions of law the court relied upon in deciding Capstone, 2020 WL 3429775). Moreover, Capstone used a “dynamic operating and reporting system which enabled it to accurately capture multiple data points for each activity performed.” Id. The resulting information was “enhanced data analysis . . . for any period of time and at any level of the operational hierarchy.” Id. PFS's allegations regarding its methodology do not come close to this level of proprietary nature. At its core, PFS's six-step model, which Plaintiff lays out in detail, entails researching cold-storage warehouses, leasing those warehouses while allowing the real estate developer to remain the property's owner, and entering into a lease with the landlord. (Am. Compl. ¶ 23.) There is nothing in the Amended Complaint that suggests that any of the data used as part of this process is proprietary. Although PFS's “landlord/tenant relationship” may be somewhat unique to the industry, that does not mean it is proprietary itself. See Gen. Pat. Corp. v. Wi-Lan Inc., No. 11-CV-6585 JFK, 2011 WL 5865194, at *4 (S.D.N.Y. Nov. 22, 2011) (Plaintiff cannot allege system for selecting and analyzing clients is a trade secret without adequately pleading it is secret, even if it is unique for the industry); see also Waterville Inv., Inc., 2010 WL 2695287, at *4-5 (E.D.N.Y. July 2, 2010) (no trade secret exists where Plaintiff has not presented any evidence, beyond conclusory assertions, that it combined publicly available information in a “unique” way). Finally, the mere possibility that PFS might purchase its leased properties cannot constitute a trade secret. See TNS Media Rsch., LLC v. TRA Global, Inc., 977 F.Supp.2d 281, 315 (S.D.N.Y. 2013) (“[I]nformation consisting simply of business possibilities or goals is not a trade secret.” (quoting LinkCo, Inc. v. Fujitsu Ltd., 230 F.Supp.2d 492, 500 (S.D.N.Y. 2002))).
Plaintiff's argument that the remaining strategic information constitutes trade secrets fare no better. Information surrounding average revenue, projections, and metrics either relates to business data that the landlords possessed, that could be easily calculated and ascertained, or could be reverse engineered, as discussed supra. PFS's conclusory assertions regarding “market leadership,” “many advantages over competitors,” “financial performance,” “business strategies,” and “highly satisfied customer base” are also overly vague and do not state with such specificity that they are based on proprietary information. These allegations are therefore insufficient to plead a trade secret. See Zirvi v. Flatley, 433 F.Supp.3d 448, 465 (S.D.N.Y.), aff'd, 838 Fed.Appx. 582 (2d Cir. 2020) (“Although the Second Circuit has not articulated a specificity requirement, district courts in this circuit routinely require that plaintiffs plead their trade secrets with sufficient specificity to inform the defendants of what they are alleged to have misappropriated” (citations omitted)). Like its other allegations, Plaintiff has not identified proprietary information itself or underlying proprietary information to plead business models or projections that qualify as trade secrets.
ii. Reasonable Measures to Guard the Information and Its Independent Economic Value
In addition to not being known to or ascertainable by external individuals, to constitute a trade secret, the owner of confidential information must have “take[n] reasonable measures to keep [the information] secret.” 18 U.S.C. § 1839(3)(A). Trade secrets must also “derive[] independent economic value” from the fact that they are not known to or readily ascertainable by “another person who can obtain economic value from the disclosure or use of the information.” 18 U.S.C. § 1839(3)(A). Having found the confidential information to be known or ascertainable by outside individuals that do not constitute trade secrets, I need not exhaust substantial effort analyzing whether PFS took reasonable steps to guard the information or whether the information had independent economic value, but I will address them briefly.
As discussed supra, PFS disclosed the majority of the confidential information- particularly the information about the properties, which Americold used in negotiations over PFS's properties-to the developers who purchased the properties and later leased them to PFS. Plaintiff alleges that PFS did not disclose alleged proprietary information on PFS's business model to the landlords, but it does not dispute that the landlords had access to information on the properties, or that they were not under any type of requirement to maintain confidentiality regarding the information on the properties. (Pl.'s Opp., at 15 (citing Am. Compl. ¶¶ 4, 8, 32, 67- 68.)) Although courts in this Circuit generally accept confidentiality agreements to constitute reasonable measures to safeguard information, see Charles Ramsey Co., Inc. v. Fabtech-NY LLC, No. 18-CV-0546, 2020 WL 352614, at *15 (N.D.N.Y. Jan. 21, 2020), PFS's confidentiality agreements with the potential bidders does not negate the fact that the landlords, and apparently the architects, were not parties to any such agreement concerning the alleged trade secrets. See Big Vision Priv. Ltd., 1 F.Supp.3d at 267-69 (disclosure of trade secrets to third parties destroys secrecy unless the third party is confined by an absolute obligation to refrain from further disclosure); see also Medicrea USA, Inc., 2018 WL 3407702 at *12 (requirement that employees sign confidentiality agreements does not save the fact that third-party business partners do not sign such agreements and are under no obligation to maintain confidentiality). The remaining information unknown to the landlords was readily available through research and follow-up methods, as HFF compiled in its summary, (see Pickhardt Decl. Ex. A), demonstrating that PFS did not take reasonable steps to safeguard that information.
There are likewise no allegations that the architects who designed the facilities were bound by a confidentiality agreement.
Plaintiff also does not sufficiently plead how an outside individual without knowledge of the information derives “economic value” from its disclosure. Plaintiff alleges in its Amended Complaint that PFS was harmed because Americold used trade secrets to negotiate with PFS's landlords regarding its properties, which consequently drove up the market price. (Am. Compl. ¶ 99.) However, much of the information that Plaintiff argues constitutes a trade secret- including the six-step facility development plan, “asset-lite” structure, market leadership, performance, “highly satisfied customer base,” and plans to improve customer service and productivity through technology-has nothing to do with the actual negotiations with landlords over the properties that Plaintiff claims drove up the market price. As discussed supra, PFS's landlords and others external to PFS knew the confidential information regarding the properties-which Plaintiff alleges harmed PFS-or the information could be readily ascertained from or calculated using information from public sources, the market, or the landlords. There is no plausible claim that this information had its own independent economic value from being secret. I therefore find that the information did not derive “independent economic value . . . from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information.” 18 U.S.C. § 1839(3).
Because I find that the alleged secret information is known to or could be readily ascertained by those outside of PFS, the information is not secret and does not constitute trade secrets. For that reason, Plaintiff's DTSA claim must be dismissed.
B. Plaintiff's State-Law Claims
In addition to its claim under the DTSA, Plaintiff also asserts state-law claims for fraud in the inducement, breach of contract, breach of the covenant of good faith and fair dealing, tortious interference with prospective economic advantage, unfair competition, and misappropriation of confidential information. (Am. Compl. ¶¶ 112-145.) Defendant moves to dismiss Plaintiff's state-law claims for lack of subject matter jurisdiction, based upon Plaintiff's failure to state a claim under the DTSA. (Def.'s Mot., at 21-22.) For the reasons set forth below, I decline to exercise supplemental jurisdiction over Plaintiff's state-law claims and, therefore, dismiss them without prejudice pursuant to Rule (12)(b)(1) for lack of subject matter jurisdiction.
a. Applicable Law
Section 1367(c)(3) of Title 28 provides that district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if “the district court has dismissed all claims over which it has original jurisdiction.” 28 U.S.C. § 1367(c)(3). Whether to exercise supplemental jurisdiction “is within the sound discretion of the district court.” Lundy v. Catholic Health Sys. of Long Island Inc., 711 F.3d 106, 117 (2d Cir. 2013) (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 349-50 (1988)). Courts “consider and weigh in each case, and at every stage of the litigation, the values of judicial economy, convenience, fairness, and comity” to decide whether to exercise supplemental jurisdiction. Lundy, 711 F.3d at 117-18 (citation omitted). “[I]n the usual case in which all federal-law claims are eliminated before trial, the balance of factors . . . will point toward declining to exercise jurisdiction over the remaining state-law claims.” Kolari v. New York-Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (citing Cohill, 484 U.S. at 350 n.7); see also, e.g., Marcus v. AT&T Corp., 138 F.3d 46, 57 (2d Cir. 1998) (“In general, where the federal claims are dismissed before trial, the state claims should be dismissed as well.”); Principia Partners LLC v. Swap Fin. Grp., LLC, No. 18-CV-7998 (AT), 2019 WL 4688711 (S.D.N.Y. Sept. 26, 2019) (declining to exercise supplemental jurisdiction over the plaintiff's state-law claims pursuant to § 1367 after the plaintiff's DTSA claim was dismissed).
b. Application
Here, because I am dismissing Plaintiff's only federal claim, the balance of factors weighs in favor of declining supplemental jurisdiction. Allowing Plaintiff to pursue its state-law claims in state court would “avoid needless decisions of state law by this Court, which also promotes the interests of comity and justice.” Moran v. Tryax Realty Mgmt., Inc., No. 15CV-8570, 2016 WL 3023326, at *4 (S.D.N.Y. May 23, 2016) (citing United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726 (1966)) (internal quotation marks omitted). Moreover, as I previously determined in my order granting in part Defendant's Motion to Stay and for Costs Pursuant to Federal Rule of Civil Procedure 41(d), the state-law claims in this action closely replicate the claims in PFS's previously decided state law action. (See Doc. 34.) Concerns about judicial economy, convenience, and fairness are limited because discovery in this action has not commenced, and a trial date has not been set. Cohill, 484 U.S. at 350 n.7 (“[I]f the federal claims are dismissed before trial[,] the state claims should be dismissed as well.” (internal quotation marks and citation omitted)).
Therefore, I decline to exercise supplemental jurisdiction over Plaintiff's state-law claims pursuant to § 1367(c). Plaintiff's state-law claims are accordingly dismissed without prejudice.
V. Conclusion
For the foregoing reasons, Defendant's motion to dismiss is GRANTED. Plaintiff's state-law claims are DISMISSED without prejudice.
Because this Opinion & Order was decided based on sealed materials not filed on the public docket, the Opinion & Order will be filed under seal. The parties are directed to meet and confer with regard to proposed redactions, and to propose redactions to me within the next thirty days. I will then review the proposed redactions and, if appropriate, implement them before publicly filing the Opinion & Order. If the parties do not submit proposed redactions within thirty (30) days, I will file the Opinion & Order in its current form on the public docket.
The Clerk of Court is respectfully directed to file this Opinion & Order under seal, with access given to the parties, terminate the motion pending at Doc. 64, and close the case.
SO ORDERED.